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China's tax burden lower than world average

(Xinhua)
Updated: 2006-03-27 15:57

China's tax burden is still lower than that of most developing and developed countries despite its rapid growth of tax revenue in recent years, the State Administration of Tax (SAT) said in a report published over the weekends.

The report says China's tax burden, measured by tax revenue divided by gross domestic product (GDP), stood at 16.93 percent in 2005, compared to 20.6 percent for developing countries or 30 percent for industrialized nations.

Inclusive of social security tax, China's tax burden rises to 20 percent. This is still lower than developing nations' 26 percent to 29 percent, or 37 percent to 41 percent for developed countries.

China recorded an annual economic growth of 12.94 percent between 2001 and 2005 in current prices. In the same period, the government's tax revenue had been growing at 19.5 percent a year, raising concerns among some sectors of the public.

The SAT report admits that the country's tax burden climbed from 13.83 percent in 2001 to 16.93 percent in 2005, but argues that it has been a result of many factors other than higher tax rates.

China's dynamic economic growth, particularly the strong growth of the manufacturing sector that carries higher tax rates, the rapid growth of China's foreign trade and improved tax collection regime all contributed to the surge of government's tax revenue, the report says.

It further points out that a reasonable rise in tax burden is justified by China's social and economic development, as the building of a well-off society requires government to provide better infrastructure facilities and public services. This, of course, needs more money.

The building of a harmonious society, another major government goal, also requires tax regime to play a bigger role in wealth redistribution, the report says, adding that the surge in corporate and individual income tax revenues in recent years indicates that the government has been doing the right thing.

Though the general tax burden has been rising, some industries and products have had their tax rates slashed in recent years. The report says the government has learnt to use the tax regime to effect the upgrading of economic structure.